S in ESG - corporate social responsibility

Key information:

• The social dimension of ESG is crucial because it directly affects people.
• Social Responsibility connects the spheres of business and society. According to this concept, companies should take into account the impact of their activities on the environment, which consists of: employees, customers, suppliers, local communities.
• The S ESG factor expands the CSR concept. Under it, a company should include social risks in its strategy and report its social impact in an ESG report.
• The key areas of social responsibility are derived from the 17 Sustainable Development Goals adopted by the United Nations. The areas primarily consist of working conditions, occupational health and safety, diversity, employee development, and human rights.
• Implementing social responsibility in practice requires a several-step approach, which should start with an in-depth baseline analysis, identifying legal requirements in this area and identifying which company activities are particularly harmful.
• In the next steps, the company should determine the indicators to be disclosed as part of the ESG report, create social responsibility strategies and undertake initiatives that bring the company closer to achieving its goals.
• The right strategy for social sustainability factors can make it easier for a company to raise capital, increase the productivity and quality of its team members, attract new employees and increase its customer base.

Details below!

The importance of corporate social responsibility

Recently ESG activities are gaining popularity among companies. Certainly, a not insignificant reason for this is CSRD requirements introduced by the European Union at the beginning of 2023, which expands the scope of entities required to report on non-financial issues. However, this is not the only reason for companies' interest in sustainability topics. More and more businesses, including those not subject to CSRD requirements, are recognizing the benefits of implementing ESG strategies, such as the positive impact of sustainability on the company branding. A very important part of ESG is the social criteria represented by the letter S (Social) abbreviated as ESG, which deals directly with people, society. Properly implemented corporate social policy can have a long-term positive impact on people's quality of life and professional well-being.

What does corporate social responsibility mean?

The social dimension of ESG is inextricably linked to the concept of corporate social responsibility. The idea is that companies take into account social interests in their operations and refers to how a company affects people in its environment. In particular, these are stakeholders that include: employees, customers, suppliers, or local communities.

By taking into account social criteria, business contributes to the formation of appropriate conditions for sustainable economic and social development. Thus, it can be said that corporate social responsibility is a concept that involves taking into account the relationship of two spheres - business and society - in such a way that the organization takes responsibility for the impact of its decisions and actions on the said area.

CSR vs corporate social responsibility

It is also worth noting that ESG social criteria should not be equated with the concept of CSR (Corporate Social Responsibility). Although on the surface the two ideas seem similar there are differences. While CSR also indicates the importance of corporate social responsibility, it is not standardized or formalized in any way. In practice, companies most often undertake ad hoc charitable activities, mainly to warm up their image. Social ESG standards, on the other hand, require a company to integrate social policies into its business strategy and provide measurable data in this regard as part of ESG reporting.

Key areas of social responsibility

Taking into account the impact of business on society may seem like a very broad and heavy topic. In practice, it boils down to several areas suggested by various regulations in this regard. Among them are:

• Working conditions - refer to workplace standards and practices designed to provide employees with a safe, healthy and supportive work environment. This includes physical working conditions, as well as aspects such as pay, working hours, employee rights and professional development opportunities.
• Occupational health and safety - focus on minimizing occupational risks and preventing accidents and work-related illnesses. Companies must use appropriate protective measures, conduct regular training, and comply with standards and regulations to ensure a safe work environment.
• Workforce diversity and inclusivity - mean actively promoting the hiring of a diverse team in terms of gender, age, race, sexual orientation, religion and other characteristics. Companies should strive to create a work culture in which every employee feels accepted and respected, and diverse perspectives are valued.
• Development and training - refer to investing in the professional development of employees through various training programs, mentoring, courses and other forms of education. The goal is not only to improve employees' professional skills, but also to support their long-term development and job satisfaction.
• Human rights - in the business context relate to respecting and protecting the fundamental rights of workers and the communities with which the company deals. Companies must comply with standards on forced labor, child labor, discrimination and other forms of human rights violations.
• Relations with the community - focus on the company's interactions with the local communities in which it operates. This includes involvement in community projects, consultation with local residents, investment in local infrastructure and efforts to minimize the negative impact of the company's operations on the environment.
• Impact on consumers and end users - concerns a company's responsibility for the quality, safety and ethical aspects of the products and services it offers to customers. Companies must ensure that their products meet high safety standards, comply with the law, and respond to consumer needs and expectations in an ethical and transparent manner.

It can be seen that these areas are closely related to Sustainable Development Goals set by the UN. Of the 17 UN goals, a socially responsible company should pursue the following: anti-poverty, good health and quality of life, good quality education, gender equality, economic growth and decent work, reduction of inequality, peace and justice, responsible production and consumption.

Implementing social responsibility in practice

Developing an appropriate corporate social policy for sustainability is a complex process. In order for a company's social activities to be in line with ESG principles, the approach to this topic must take several steps.

First, the company should audit for the social dimension of ESG. As part of the audit, the company should focus on obtaining detailed information from its team about their assessment of the workplace, sense of security and job satisfaction. Interviews should also be conducted with other stakeholders. The purpose of this stage is to examine the extent to which the company's existing social policies are in line with ESG principles.

The next stage is Detailed identification of the requirements for the company arising from CSRD standards. At this stage, the company should also identify which of its activities may have a particularly negative impact on employees, the local community, customers and other stakeholders. Once social risks have been identified, the time is right to conduct a materiality analysis of the various factors and determine the information to be disclosed under ESRS reporting standards.

The next stage will be to determine the indicators that will be reported. Among them should be indicators relating to the company's diversity policy and employment, work-life balance principles and job rotation. No less important are indicators relating to equal pay, occupational health and safety, and specifying the company's human rights standards. Examples of indicators disclosing the above-mentioned company-related social information:

• The percentage of women among employees,
• The percentage of people employed on a contract basis,
• The percentage of people working at the Company for more than 5 years,
• Expenses for external training for Employees and management,
• The percentage of women employed in managerial positions,
• number of trainings,
• number of accidents at work,
• The average number of vacation days to be taken during the year.

Finally comes the right time to design a social responsibility strategy. At this stage, the Definition of socially sustainable development goals. The company also indicates how it intends to remedy the shortcomings identified during the audit and achieve its goals. It is crucial to determine what social activities, initiatives the company will undertake and what tools it will use to become more socially responsible and increase its social transparency. It is also important to determine the timeframe in which the goals should be achieved. At this stage, the company should also determine the methodology for calculating the indicators that will be published as part of non-financial reporting.

The final stage will be the implementation of the strategy prepared under the company's social sustainability policy. The priority now is to make the best organize and carry out social activities, established in the development of the strategy. In this regard, companies have a wide range of options.

Implementation of corporate social responsibility strategy

Examples of steps that will help implement a social responsibility strategy could be:

1. Social campaigns - Businesses can shape social attitudes through media activities. Examples of social involvement in business can be found in many places. Companies can get involved in initiatives to help society or educate audiences about certain topics. For example, they can donate a portion of their revenues to support social initiatives.
2. Local community initiatives - The company can achieve its strategic goals by undertaking initiatives that support the environment in which it operates. One example is cooperation with local organizations or the local government, which involves organizing workshops and training for children and young people from local schools.
3. Employee volunteering - is the voluntary involvement of employees in a variety of social initiatives. It can include organizing charitable collections in the workplace or participating in campaigns to promote socially relevant issues and topics.
4. Programs for employees - are initiatives focused on professional development, upskilling and leveling the playing field. They include training, courses, flexible employment and programs for employees at risk of exclusion. Examples of corporate social responsibility include job activation programs for people with disabilities and the elderly.
5. Increasing Occupational Health and Safety -. are measures to ensure safe and healthy working conditions for all employees. Companies can implement a variety of initiatives in this area, such as regular health and safety training, safety audits, investment in modern protective equipment and ergonomic workstations. It is also important to conduct health and safety information campaigns and promote a culture of safety in the workplace. Examples of corporate social responsibility in this area? Prevention programs aimed at employees performing work in high-risk conditions, or providing regular medical examinations for employees exposed to harmful environmental factors.

These are only examples of initiatives that a company can undertake. In practice, companies are free to shape their social activities. However, they must ensure that their activities are in line with ESG principles, socially, contribute to their strategy, achieve their goals and improve the indicators reported in the ESG report.

Benefits and Challenges of Social Responsibility

A proper social sustainability strategy and its implementation can bring many benefits, not only to stakeholders, but also to the company itself. Current global trends indicate a growing interest in investing in socially responsible companies. Companies characterized by a high degree of transparency on social policy may have easier access to capital, or raise it on better terms.

Taking care to properly uphold the principles of social responsibility in matters of employment, working conditions and safety can significantly contribute to improving job satisfaction among employees and raise overall team morale. This, in turn, ensures that employees will perform their tasks with diligence and commitment, which in the long run can have a positive impact on the performance of team members and can translate into better results. Good working conditions and appropriate policies towards employees will also encourage good candidates to apply when recruited to the company.

Today, consumer awareness of social responsibility is growing. A large group of customers relies on products from companies demonstrating a high level of social responsibility. A company's strategy and appropriate social activities can contribute to attract the attention of informed consumers and expand the company's customer base to include them, which will translate directly into better financial results. Taking initiatives for the benefit of the local community can also be a chance to win over new customers. Certainly, the beneficiaries of such actions will look favorably on a local company that has them in mind, and will be more likely to choose its products or use its services.

Despite the undeniable benefits that the social aspect of sustainability brings, there are also challenges associated with it. The most common difficulty encountered is the time-consuming and complexity of implementing the described solutions. Unfortunately, the transformation to social responsibility requires knowledge and experience in this area. Not every company can afford to set up a sustainability department and hire specialists for it. A good solution for companies interested in this topic is to use the services of consulting companies that offer assistance in this area.

Take care of the social aspect of ESG in your company

Social ESG issues are a key part of companies' sustainability strategies because they directly affect people and their environment. Implementing social responsibility into a company's operations requires a multi-step approach o Although the process is complex and time-consuming, the benefits are significant.

With the right actions and continuous monitoring of progress, companies can effectively implement social ESG principles, becoming more socially responsible and building lasting relationships with stakeholders, resulting in long-term market success. If you also see the benefits of implementing social responsibility in your company, but don't know how to start developing a strategy contact us!